THE SCENARIO
Last time, I talked a bit about rising interest rates and their affect on the size of a loan a person can afford. Today, I'd like to take a look at the same question, but from a different angle.
So this time, we're going to assume that I want to buy a $500,000 house, and I have 20% ($100,000) to put down when I complete the purchase.
I'm going to assume that I can get a 30-year, fully-amortizing loan for the remaining $400,000 balance.
The question: How much higher would my monthly payment be if I were to borrow the money at 5.25% instead of 4.125%?
THE SOLUTION
This question is relatively straightforward: figure out the monthly payment at two different interest r...
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